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If you’re planning to do some in-store holiday shopping this season, be prepared to hear plenty of offers to save an extra 10 or even 20 percent on your purchase by opening a new credit card. An additional discount sounds appealing, but these cards may not provide you much cheer once your statements start arriving. A recent survey conducted by revealed an average APR of 23.84% for credit cards from specific retailers. The average APR of all credit cards comes in at a much lower 15.18%. Let’s take a look at what those numbers mean, along with how they can impact your personal finances and when it might actually make sense to accept a store credit card offer.

How does APR impact your overall costs?

The best strategy for maximizing the rewards potential of a credit card is paying off your bill in full each month. However, most Americans aren’t using this strategy. In fact, the average American between the ages of 18 and 65 has $4,717 of credit card debt. For example, let’s say you fit perfectly into that average, but you really want to be debt-free. With a 15.18% APR, you’ll need to pay $450 per month for one year to pay off the amount. Your total interest charges will be about $376.

Now, let’s say that your $4,717 of debt is on an average store credit card. If you make the same payments each month to get debt-free in one year, your interest charges will clock in at $625. Translation: The store wins.

Before you open a new store credit card, do the math to determine if the rewards will pay off. Image courtesy of Getty Images.
Before you open a new store credit card, do the math to determine if the rewards will pay off. Image courtesy of PhotoAlto/Odilon Dimier via Getty Images.

What is that bonus offer really worth?

Store credit card offers are built on answering a simple question: Would you like to save some cash today? Of course, the answer is yes. Everyone wants to save some extra bucks. If the purchase is big enough, that one-time bonus discount can prove to deliver a sizable benefit. However, it’s important to note that many of those appealing bonuses are capped. For example, if you open a Macy’s Credit Card, you can save 20% today and tomorrow, but the savings will not exceed $100. If you’re planning to purchase $500 worth of clothes and goods from Macy’s, this might make sense. You’ll be able to knock off a sizable chunk of your final bill. If you’re spending more (or less), it might not be worth the effort.

What will the long-term benefits mean?

While that $100 is certainly a nice perk, it’s important to comb through a range of other details that will matter after the one-time discount. Outside of understanding your APR, transaction fees and other essentials, you must think about the everyday benefits of using the card — not just the day you open the account. How often do you shop at the store? For example, if you’re constantly at Macy’s, that credit card can pay off with 10% rewards points on most purchases.

Does the card offer access to enhanced benefits? If you spend over a certain threshold on some cards, you may qualify for elite status with more savings opportunities. And how does the card reward the purchases you make at other retailers? This is the pain point with a lot of these cards; you may not be rewarded for spending elsewhere, or your points may only be good at that specific retailer.

So, is a store credit card ever worth it?

Depending on how you answer those questions, a store credit card can actually pay dividends. For example, the Target REDcard offers 5% off all purchases with the retailer, along with free shipping on most orders for cardholders. Since Target sells basically everything, your savings can really add up throughout the year. If you’re looking for a card with more flexibility, you could consider the Rewards Visa, which offers 3 points per dollar spent at Amazon, 2 points per dollar spent at restaurants, drug stores and gas stations and 1 point per dollar spent everywhere else.

Whether you’re comparing offers online or contemplating the offer in the checkout aisle, the key takeaway to remember is that all of the points, percentage discounts and sign-up bonuses don’t mean much if you’re carrying a big balance from month to month. For more insights on why you should aim to keep your balance as close to zero as possible, check out “Debunking Credit Card Myths: Does Carrying A Balance Help My Credit Score?”

Do you have any store credit cards in your wallet?

Featured image courtesy of Getty Images.

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